Searching for a Break in Gnp

34 Pages Posted: 29 Jun 2004  

Lawrence J. Christiano

Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Date Written: August 1988

Abstract

It has been suggested that existing estimates of the long-run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in post war U.S. GNP data. This paper shows that the statistical evidence does not warrant abandoning the no trend null hypothesis. A key part of the argument is that conventionally computed significance levels overstate the likelihood of the trend break alternative hypothesis. This is because they do not take into account that, in practice, the break date is chosen based on pre-test examination of the data.

Suggested Citation

Christiano, Lawrence J., Searching for a Break in Gnp (August 1988). NBER Working Paper No. w2695. Available at SSRN: https://ssrn.com/abstract=227255

Lawrence J. Christiano (Contact Author)

Northwestern University ( email )

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Federal Reserve Bank of Cleveland

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Federal Reserve Bank of Chicago

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